v2025

v2025 (2)

Economic

Central Bank keeps interest rates on hold to bolster GDP growth

Sri Lanka’s central bank kept its benchmark interest rates unchanged to help bolster an economy that’s been hit by bad weather across the South Asian island.

Governor Indrajit Coomaraswamy held the standing lending facility rate at 8.75 percent and the standing deposit facility rate at 7.25 percent, the Central Bank of Sri Lanka said in a statement from Colombo on Thursday. The move was predicted by six of the seven economists in a Bloomberg survey.

The worst drought in 40 years, followed by the most severe flooding in over a decade, curbed growth last year, while disrupting supply chains and pushing the inflation rate above the central bank’s target range of 4 percent to 6 percent. Consumer prices rose 5.8 percent in January from a year ago.

“The decision of the Monetary Board is consistent with the objective of maintaining inflation at mid-single digit levels over the medium term and thereby facilitating a sustainable growth trajectory,” the central bank said. “The economy is currently operating at a level below its potential,” but should recover from weather-related effects as trade and foreign direct investment picks up, it said.

The central bank has been on hold since raising rates in March last year. The International Monetary Fund has said it supports Sri Lanka maintaining a tightening bias and the monetary authority should contain credit growth and inflation.

(Bloomberg)

Comment (0) Hits: 215

Sri Lanka Achieves Highest Ever FDI in 2017

Foreign Direct Investment (FDI) into Sri Lanka grew to over US$1.63bn in 2017, doubling from the US$802m achieved the previous year. The Board of Investment (BOI), the agency tasked with promoting and facilitating FDI, reported that US$1.63bn has been achieved in 2017, which is the highest ever surpassing the US$ 1.61 in 2014, with solid growth across key sectors.

The strong growth is a direct consequence of the Government’s reorientation of economic policy towards investment and export-driven growth, rather than debt-funded public infrastructure spending. Among the highest growth sectors were export-oriented Manufacturing (+27%) and Services which includes Tourism and IT (+50%) and Infrastructure (+190%). The highest FDI came from China, followed by Hong Kong, India and Singapore.

The BOI, under the Ministry of Development Strategies and International Trade, is the first point of contact for foreign investors into the country. “The outstanding FDI results have been achieved due to the hard work, talent and dedication of our investment promotion and facilitation teams as well as the pro-investor policy framework of the government to support both local and foreign investors,” BOI Director General Duminda Ariyasinghe said.

Over the past 2 years, the BOI has targeted both new investors, leveraging the country’s strengths and advantages, as well utilizing existing investors to increase reinvestments and to utilize their external networks to bring in new investors in sectors such as export-oriented manufacturing. The agency has focused on fast and transparent decision-making utilizing two high-level committees appointed by the Hon Prime Minister that provides approvals as well as accelerated operational clearances.

Ariyasinghe said BOI has embarked on several new initiatives including a virtual One Stop Shop for investment facilitation with 24 government agencies which will come into operation in 2018 to strengthen the approval and executional mechanisms. “The support and guidance from our Chairman and the Board of Directors have been a strength to us in achieving these strong results.”

Minister of Development Strategies and International Trade Malik Samarawickrama said that while Sri Lanka has achieved strong FDI results in 2017, the country has only scratched the surface of its full potential. “This is not a time for complacency but renewed focus to use the momentum to strengthen reforms to improve our Ease of Doing Business ranking, and efforts to attract high-quality investors from countries we have renewed bilateral relationships with.

The Minister said the country’s target was to achieve US$5b in FDI by 2020. Samarawickrama said he was confident of achieving US$2.5bn of FDI in 2018. In order to facilitate FDI, the new Inland Revenue Act provides accelerated investment allowances over and above normal depreciation until companies recover their total fixed investment. The foreign exchange regime too has been liberalized to improve the investment climate via the new Foreign Exchange Act.

The BOI has initiated work on developing several new export promotion zones including Milleniya, Bingiriya, Weligama and Mawathagama. These will be the first comprehensive BOI zones to be developed since 2000.

Comment (0) Hits: 363

Sri Lanka Rupee hit by political uncertainty

The Sri Lankan Rupee further depreciated today due to the prevailing political uncertainty in the country. Depreciating to a record low today the Rupees was set at Rs. 155. 80 against the US Dollar by today afternoon.

Sources claim that the depreciation is being caused due to panic buying by importers due to the political situation in the country.

Comment (0) Hits: 233

ADB to provide USD 75 million to develop the SME sector

The Asian Development Bank’s (ADB) Board of Directors has approved $75 million in additional financing to continue support toward the development of small and medium-sized enterprises (SMEs), considered vital for economic growth and job creation in Sri Lanka.

SME 1

Many of the SMEs have no previous experience dealing with formal financial institutions like banks, are led by women, or based in rural areas.

“SMEs have the potential to reduce regional inequalities in Sri Lanka given that SMEs are more widespread throughout the country than larger enterprises, which are mainly based in the capital Colombo,” said Don Lambert, an ADB Principal Finance Specialist. “The additional support will ensure that more SMEs have wider access to credit.”

SMEs contribute about 45% of Sri Lanka’s gross domestic product and provide about half of the country’s jobs. However, access to finance remains a significant challenge for the SMEs. About 30% of local enterprises cite this issue as a major deterrent to their growth and development—one of the highest percentages among ADB developing member countries after Afghanistan, Mongolia, and Nepal.

Many of these SMEs have no previous experience dealing with formal financial institutions like banks, are led by women, or based in rural areas.

The additional financing for the SME Line of Credit Project will increase the available loans for participating banks to $175 million by 2020, from the original loan figure of $100 million approved in February 2016. This additional support will further encourage local partner banks to grow their SME portfolios—particularly to enterprises outside Colombo or are women-led—and eventually help Sri Lanka address some of its major development challenges through economic diversification, job creation, women empowerment, and inclusive growth.

Apart from providing wider access to finance to SMEs, the project is also developing innovative SME financing schemes, while building capacity of SMEs particularly in information and communications technology, business process outsourcing, fruits and vegetables, as well as processed food and beverage.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members—48 from the region.

 

Comment (0) Hits: 217

Kuwait has no plans to suspend Sri Lankan labour; discussions underway to increase technical personnel

Kuwait’s Minister of Social Affairs and Labor and Minister of State for Economic Affairs Hind Al-Subeeh praised the strong bilateral relations between the Kuwaiti and Sri Lankan governments during the Independence Day celebrations held at the Sri Lankan Embassy in Kuwait and denied reports that suggested an imminent suspension of Sri Lankan labour in Kuwait, the Al-Anba Daily reported.

 Kuwait 1

Construction workers on the site at the Jahra roundabout in Kuwait City .

 Minister Al -Subeeh described these relations as continuous and devoloping since 1971. The Minister described the Sri Lankan workforce in Kuwait as organized and ‘healthy’.

She said that discussions are underway to raise the proportion of Sri Lankan technical personnel in the private sector companies in light of the agreed terms and recommendations agreed upon during the fourth consultative meeting of the Abu Dhabi-Sri Lanka 2017 dialogue.

Sri Lanka’s Ambassador to Kuwait Kaandeepan Balasubramaniam said bilateral relations with Kuwait have always been excellent and cordial, and describing Kuwait as a regional friend. He said Sri Lanka was at the forefront of countries that supported the Kuwaiti right at all international forums when it was subjected to the brutal Iraqi occupation.

Comment (0) Hits: 234

Sri Lanka seeks to modify performance criteria; EFF broadly on track: IMF

Sri Lanka’s performance under the Extended Fund Facility (EFF) program has remained broadly on track despite a series of weather-related supply shocks, the IMF said.

Following the Executive Board’s discussion of the third EFF review, Mitsuhiro Furusawa, Acting

Chair and Deputy Managing Director of IMF, said country’s fiscal performance has been satisfactory and all targets until September were met.

“Nevertheless, Sri Lanka’s high debt burden, large gross financing needs, and weak financial performance of state-owned enterprises increases the importance of further fiscal consolidation,” Furusawa said.

“Timely progress in structural reforms, including tax administration and energy pricing, will support fiscal consolidation.”

Sri Lanka’s budget targets a primary surplus of 1 percent of GDP and frontloads fiscal consolidation towards the authorities’ objective of reducing the overall fiscal deficit to 3.5 percent of GDP by 2020.

Meanwhile, in a letter to IMF’s Christine Lagarde, Finance Minister and Central Bank Governor has requested the modification of the performance criterion on central government primary balance and the indicative target on tax revenue for December 2017.

The primary balance of the central government on a cash basis is defined as central government revenues and grants minus expenditures and net lending, plus interest payments.

Central government tax revenue refers to revenues from taxes collected by the central government. It excludes all revenues from asset sales, grants, and non-tax revenues.

Source : LBO

 

Comment (0) Hits: 295

Sri Lanka, Singapore FTA is credit positive for both nations:Moody's

The free trade agreement signed last week between Singapore (Aaa stable) and Sri Lanka (B1 negative) will enhance the cross-border trade of goods and services and promote foreign direct investment (FDI) between the two countries, a credit positive for both, said ratings agency Moody's Investors Service on Monday (29).

The Sri Lanka-Singapore Free Trade Agreement (SLSFTA) is Singapore's 21st trade agreement with 32 trading partners, and reiterates Singapore's commitment to free and open markets.

"Particularly within the region, the agreement promotes the growth of outward Singaporean investment, helps maintain its strong positive net international investment position (224 per cent of 2016 GDP), and solidifies its strength as a hub for global trade, finance, and logistics," said Moody's.

Singapore also stands to save about S$10 million each year as Sri Lanka will eliminate tariffs on 80 per cent of Singapore's exports over the next 15 years.

But the pact will have a bigger effect on Sri Lanka's credit quality because the potential increase in current account inflows and inward investments would help reduce its elevated external vulnerability, said Moody's.

Because Singapore already does not impose import duties on 99 per cent of the items listed in the tariff schedule for Sri Lankan exports to Singapore, the pact's main trade benefits for Sri Lanka will materialize through the opening of access to the broader Association of Southeast Asian Nations (Asean) market and other large economies given Singapore's existing preferential trade arrangements with Australia, Japan, Korea and other countries in Southeast Asia, said Moody's.

In 2017, Sri Lanka was Singapore's 37th-largest trading partner, while Singapore was that nation's eighth-largest trading partner. Their bilateral trade amounted to about 0.5 per cent of Singapore's gross domestic product (GDP) and 2.5 per cent of Sri Lanka's.

The extent to which the SLSFTA reduces Sri Lanka's external vulnerability will depend on its effectiveness at bolstering services and investment flows, said Moody's. Sri Lanka's current account has a structural deficit because a large merchandise trade deficit more than offsets a surplus in services and remittance inflows, the agency explained. Moreover, FDI inflows only partially finance the current account shortfall, resulting in a persistent basic balance deficit, it added.

SL SNG FTA

Minister for Development Strategies and International Trade Malik Samarawickrama and Minister for Trade and Industry of Singapore S. Iswaran signing the FTA in the presence of President Maithripala Sirisena and Prime MInister Lee Hsien Loong.

Moody's said the pact is likely to boost Sri Lanka's services receipts, particularly in tourism.

Using travel and passenger transport by air as a proxy, tourism accounts for about three-quarters of the services surplus. Although Singapore comprised less than 1 per cent of Sri Lanka's total tourist arrivals in 2017, the SLSFTA may allow Sri Lanka to leverage Singapore's transportation hub to attract more tourists, said Moody's.

Additionally, there are provisions on the cross-border transfers of information by electronic means and data flows, which could aid Sri Lanka's burgeoning IT services sector, said the agency.

Moody's also expects the agreement to promote direct investment in Sri Lanka by Singapore companies. According to the Sri Lankan government, FDI from Singapore totaled US$658 million (less than 1 per cent of Sri Lanka's GDP) during 2006-17 in sectors such as food manufacturing and real estate. By easing regulation in the services sector, the SLSFTA will broaden the scope of investment to other areas such as infrastructure, logistics, education and healthcare, said Moody's.

The agreement also protects against expropriation, improves transparency through safeguards against discriminatory treatment and provides for a dispute resolution mechanism, all of which create a better investment climate to attract FDI, said the agency.

(Straights Times)

Comment (0) Hits: 303

Sri Lanka among top frontier markets to invest

Frontier markets, which include the likes of Sri Lanka and Argentina, are potentially lucrative because they’re at a relatively early stage of their development.

However, the political and economic backdrops of these countries can also be unstable, which means investors need to prepare themselves for a rocky ride.

This means frontier markets won’t be for everyone, according to Juliet Schooling Latter, research director at Chelsea Financial Services. The positives, she suggested, include a low correlation to other asset classes, very good demographics and plenty of under-researched companies.

Which frontier areas are most exciting?

“We view opportunities in Sri Lanka as relatively overlooked and valuations are decidedly cheap despite there still being high-quality management in place,” Oliver Bell, Manager of the T.Rowe Frontier Markets Equity fund said.

Its location adds to its attractiveness and potential. “Recent infrastructure projects, including port developments, are likely leading to a construction boom and there are some good stocks in which to play this,” he added.

“Argentina and Pakistan (which has been reclassified to emerging market status) have been our biggest exposures because their structural developments have been conducive to business growth and investment,” he said.

(BT)

Comment (0) Hits: 232

Japan to sanction digital exchange after massive cryptocurrency heist

Japan said Monday it would impose administrative measures on virtual currency exchange Coincheck after hackers stole hundreds of millions of dollars in digital assets from the Tokyo-based firm.

The massive heist caused a loss of $530 million worth of the cryptocurrency NEM -- based on the exchange rate on Friday -- exceeding even the $480 million in bitcoin stolen from the MtGox exchange in 2014.

Coincheck suspended trading of all cryptocurrencies except bitcoin on Friday, and said it had lost 523 million units of NEM, the 10th biggest cryptocurrency in the world based on market capitalisation. "The Financial Services Agency (FSA) will issue an order to improve operations, including protection of clients," top government spokesman Yoshihide Suga said.

The agency will supervise the exchange to ensure the measures are being implemented and contracts are being honoured, Suga told a regular briefing. "While examining the cause of the incident and taking necessary measures, we want the ministries and agencies concerned to urgently study what further measures we'd need," he added. Coincheck said it would use its own funds to reimburse about 46.3 billion yen (around $430 million) -- at a rate of 88.549 yen per NEM -- to all 260,000 customers who lost their holdings.

One unit of NEM was trading at 98 cents at around 0430 GMT on Monday, according to coinmarketcap.com. Japan is a leading market for cryptocurrencies, with nearly one-third of global Bitcoin transactions in December denominated in yen, according to specialist website jpbitcoin.com.

As many as 10,000 businesses in Japan are thought to accept bitcoin, and bitFlyer, the country's main bitcoin exchange, saw its user base grow beyond one million in November.

Many Japanese, especially younger investors, have been seduced by the idea of strong profits as the economy has seen years of ultra-low interest rates offering little in the way of traditional returns.

In the wake of the MtGox scandal, Japan passed a law on cryptocurrencies that require exchanges to be regulated by the FSA.

The law went into effect in 2017. Local media reported that Coincheck had submitted an application to the FSA for a licence and was allowed to continue operating while it awaited a decision.

Source : Economy Next

Comment (0) Hits: 240

Ceylon tea farmers sense trouble brewing over Glyphosate ban

Tea farmers in Sri Lanka want their government to reauthorize the use of glyphosate for agriculture.

The country is one of only five in the world to ban the chemical, the active ingredient in Monsanto’s top-selling herbicide Roundup.

With last month’s news that the European Union extended authorization for glyphosate for five more years, Sri Lankan tea industry representatives say they are at a crippling disadvantage compared to their global competitors.

“Many plantation owners have started using alternatives which are not authorized. These are now coming up in various countries,” said Rohan Pethiyagoda, chairman of the Ceylon Tea Board, speaking at a planter’s forum last September.

Tea 1

According to Pethiyagoda, “excessive residue” of such unauthorized chemicals was detected in Ceylon Tea exports bound for Germany and Japan last August.

 “Sooner or later, this is going to lead to importing countries putting restrictions on Sri Lankan tea exports,” he said.

Tempest in a Teapot

Known by the country’s old name, Ceylon tea is the mainstay of Sri Lanka’s economy. The country is the second-largest exporter of tea in the world, after China.

The ban was put in place by presidential order in 2015 after a study suggested glyphosate was partially responsible for an epidemic of chronic kidney disease killing thousands of agricultural workers in hot, dry areas.

Glyphosate’s impact on health has divided scientists and regulators for years. In 2015, the UN’s International Agency for Research on Cancer (IARC) reported that glyphosate was “probably carcinogenic to humans,” while the UN Food and Agriculture Organization found the opposite.

“There is no evidence that glyphosate, or for that matter any pesticide, has a role in this kidney disease,” said Parakrama Waidyanatha, a scientist and former chairman of Sri Lanka’s Coconut Research Institute.

Tea 2

Parakrama Waidyanatha points to a joint report from the World Health Organization that found no evidence to implicate any agrochemical as the cause of chronic kidney disease.

“The government acted foolishly on a report by a few researchers whereas the mainstream scientists have repeatedly pointed out the fallacy of that report,” Waidyanatha told Bloomberg Environment.

 Black-Market Glyphosate

In the face of rising crop losses because of overgrowing weeds, the Planters’ Association of Ceylon is asking the government to either overturn the ban or provide an effective replacement for glyphosate.

“Unfortunately, the situation is becoming extremely dire for the tea sector,” association chairman Roshan Rajadurai said in a news release.

According to Rajadurai, crop loss in the first 18 months after the ban totaled to some $100 million.

Last month, Sri Lankan police seized 5,400 packets of illicit glyphosate. Investigators say the contraband is smuggled into the country on boats from India, where it is sold at four to five times the original cost.

“Time and again we have called on the government to at least give us an alternative to glyphosate, and unfortunately there has been no response whatsoever,” Rajadurai said.

Without an effective weed killer, Rajadurai said additional labor costs for manual weeding, as well as lost production, are giving an advantage to Sri Lanka’s main competitors in the tea sector, Kenya and India.

In addition to the glyphosate question, Sri Lanka was also recently hit with a Russian prohibition on Ceylon tea.

Russia imposed the temporary ban in December after authorities allegedly discovered a Khapra beetle in shipment of tea. The beetle is one of the world’s most destructive pests of stored grain and seeds.

Sri Lankan officials speculate that the move was actually in retaliation for Sri Lanka’s decision to bar imported asbestos roofing materials from Russia.

Bigelow Tea Lawsuit

As the Sri Lankan tea scuffle unfolds, the potential for glyphosate to show up in tea is attracting notice in the U.S. as well.

R.C. Bigelow, Inc., the number-two selling tea brand in the U.S., is being sued by the Organic Consumers Association (OCA), an advocacy group based in Minnesota.

The lawsuit, filed on Dec. 15, alleges that glyphosate can be detected in some of the company’s tea products.

But the lawsuit isn’t claiming that Bigelow broke any laws—only that it deceptively labeled, marketed, and sold tea products as “All Natural” and “Natural,” in order to make the products appear environmentally friendly.

Bigelow stated that the levels of glyphosate detected were well below the government standard and called the lawsuit “beyond frivolous.”

“People have lost perspective,” said Cindi Bigelow, president and chief executive officer of the family-owned company.

According to OCA, samples of tea purchased at Wal-Mart Stores Inc. turned up glyphosate levels of 0.38 parts per million (ppm), which is below the federal standard for tea of 1 ppm.

“The level they found is 62 percent below the EPA standard,” said Bigelow, “And the standard for tea is five times higher than a carrot.”

Furthermore, Bigelow said that according to internal tests, levels of glyphosate in brewed tea are “absolutely zero.”

Asked whether she is concerned about tea coming from Sri Lanka, Bigelow said the company meticulously checks its supply chain.

“We buy a lot of tea from Sri Lanka and haven’t found any glyphosate.“

“It’s the ‘champagne of teas’,” she added.

Comment (0) Hits: 236

Sri Lanka to ban re-export of tea, areca nuts, pepper: President

Sri Lanka will ban the re-export of areca nuts (betel nut) and tea, President Maithripala Sirisena has said, as the country aspires to become a logistics hub with entrepot trade and build global supply chains.

The importation and re-export of pepper amid low global prices has led to a "collapse" of the industry, President Sirisena had claimed at an election rally in Badulla.

The import and re-export had hurt Sri Lanka's image of Ceylon Tea, President Sirisena, who heads Sri Lanka Freedom Party.

Though economic management has been entrusted to the United National Party, when ordinary people are affected, a National Economic Committee, appointed by him will look into such issues, President Sirisena had said.

Sri Lanka has failed to join global supply chains or become a large player in the rapidly growing processed food sector, due to import protection on raw materials.

Attempts by major exporters to made Sri Lanka the lynchin of a global supply chain in tea has also failed due to the opposition of a players who have managed to convince tea farmers that it will hurt prices.

However some types of tea is allowed in for re-export.

Some Sri Lanka based firms have built customers relationships with buyers and brands abroad to supply them with processed or semi processed food. The business can go to other suppliers in times of drought.

The Minister of Plantations Industries Navin Dissanayake has taken a far reaching decision to allow the import of coconut kernels to produce items like desiccated coconut and also bristle fibre to make brushes and other cleaning products.

A country can also add value to products without much processing by supplying goods fast and in smaller quantities using logistics advantages, or simply by sifting through different suppliers to fit exact price/quality requirements of a buyer.

Source : Economy Next

Comment (0) Hits: 226

Electric and Hybrid cars the way to go

Sri Lanka seems to be on the right track when it comes to electric and hybrid cars as countries around the world have ramped up their promotion of hybrid and electric cars. As China tries to improve air quality and dominate new vehicle technology, the Chinese government expects one in five cars sold to run on alternative fuels by 2025.

France and Britain plan to end the sale of gasoline and diesel-powered cars by 2040.

Electric PIC 01

Caption: Finance Minister Mangala Samaraweera said that the import taxes on electric cars will be reduced by at least Rs. 1 million while the import tax on the high end fossil fueled cars will be increased by almost Rs. 2.5 million.

Presenting the budget for 2018, Minister of Finance Mangala Samaraweera announced that all vehicles in the country will be powered by non-fossil fuel sources by 2040. To this end, all government vehicles will be converted to hybrid or electric vehicles by 2025.

Furthermore, from January this year, Samaraweera said that Sri Lanka will follow the environmentally-friendly Euro 4 emissions standard as adopted by European nations.

To promote the use of electric cars, Minister Samaraweera proposed that taxes on the importation of electric vehicles including electric three wheelers, cars and buses will be reduced. As such, import taxes on electric cars was reduced by at least LKR 1 million.

In addition, the Loan to Value (LTV) ratio for motor cars which was set at 50:50 at was further relaxed for Hybrid vehicles where one could get a loan of up to 70% of the value.

Although electric vehicles and hybrids account for a small portion of the global market now, automakers including those, like Tesla, that produce only electric models, and giants like Volkswagen who produce both electric and hybrid vehicles have bet billions of dollars that such vehicles will soon be as cheap and ubiquitous as conventional cars.

Comment (0) Hits: 240

Page 8 of 10